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United Spirits Ltd.

BSE: 532432 | NSE: MCDOWELL-N |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE854D01024 | SECTOR: Breweries & Distilleries

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557,740
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  • Bid Price (Qty.)

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  • Offer Price (Qty.)

    511.15 (121)

Annual Report

For Year :
2019 2018 2017 2016 2015 2014 2013 2012 2011

Auditor's Report

INDEPENDENT AUDITORS'' REPORT

To the Members of United Spirits Limited

Report on the audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of United Spirits Limited (the Company), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (Ind AS) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2019,and its total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year then ended on that date.

Basis for opinion

3. We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

4. We draw attention to the following matters:

a) As explained in Note 41 to the standalone financial statements, upon completion of the Initial Inquiry,

which identified references to certain Additional Parties and certain Additional Matters, the MD & CEO, pursuant to the direction of the Board of Directors, had carried out an Additional Inquiry that revealed transactions indicating actual and potential diversion of funds from the Company and its Indian and overseas subsidiaries to, in most cases, Indian and overseas entities that appear to be affiliated or associated with the Company''s erstwhile nonexecutive Chairman and other potentially improper transactions.The amounts identified in the Additional Inquiry have been fully provided for or expensed by the Company and/or its subsidiaries in earlier periods. Management is currently unable to estimate the financial impact on the Company, if any, arising from potential non-compliances with applicable laws in respect of the above.

b) As explained in Note 42(b) to the standalone financial statements, pursuant to its strategic objective of divesting non-core assets and rationalization of its subsidiaries, the Company has commenced the rationalization process and has sought approval of regulatory authorities for divesting its stake in an overseas subsidiary and liquidating three of its wholly owned overseas subsidiaries and three of its wholly owned step-down overseas subsidiaries. The completion of the above divestment as well as liquidations by the Company are subject to regulatory and other approvals (in India and overseas). At this stage, it is not possible for the management to estimate the financial impact on the Company, if any, arising out of potential historical non-compliances, if established, with applicable laws, with respect to its overseas subsidiaries.

c) As explained in Note 44(a) to the standalone financial statements, the Managerial remuneration for the year ended March 31, 2015 included an amount paid in excess of the limit prescribed under the provisions of Schedule V to the Act by INR 134 million to the former Executive Director and Chief Financial Officer (ED & CFO). The Company has initiated steps, including by way of filing a suit for recovery before the jurisdictional court, to recover such excess remuneration from the former ED & CFO.

d) Note 45 to the standalone financial statements:

i) regarding clarifications sought by Securities and Exchange Board of India on matters covered by the Company''s Initial Inquiry and Additional Inquiry and certain aspects of the agreement entered into by the Company with its erstwhile non-executive Chairman to which the Company has responded;

ii) regarding various issues raised and show cause notices issued pursuant to an inspection under Section 206(5) of the Companies Act, 2013 by Ministry of Corporate Affairs/ Registrar of Companies, Karnataka, alleging violation of certain provisions of the Companies Act, 1956 and Companies Act, 2013, to which the Company had responded. Following the aforesaid show cause notices,the Company received a letter dated October 13, 2017 from the Registrar of Companies, Karnataka (the Registrar) inviting the Company''s attention to the compounding provisions of the Companies Act, 1956 and Companies Act, 2013. The Company thereafter filed applications for compounding of offences with the Registrar in relation to three show cause notices, applications for adjudication with the Registrar in relation to two show cause notices and requested the Registrar to drop one show cause notice based on expert legal advice received, for which response is awaited.

iii) regarding the ongoing investigation by the Directorate of Enforcement in connection with the agreement entered into by the Company with its erstwhile non-executive Chairman and investigations under the provisions of Foreign Exchange Management Act, 1999 and Prevention of Money Laundering Act, 2002 to which the Company had responded; and

iv) regarding clarifications sought by Authorised Dealer banks in relation to certain queries from the Reserve Bank of India with regard to remittances made in prior years by the Company to its overseas subsidiaries, past acquisition of

the Whyte and Mackay group, clarifications on Annual Performance Reports submitted for prior years and clarifications on compliances relating to the Company''s overseas Branch office, to which the Company has responded/ is in process of responding.

e) As explained in Note 46 to the standalone financial statements, the Company is in litigation with a bank (the Bank) that continues to retain the pledge of certain assets of the Company and of the Company''s shares held by USL Benefit Trust (of which the Company is the sole beneficiary) despite the Company prepaying the term loan to that bank along with the prepayment penalty and further depositing an additional sum of INR 459 million demanded by the Bank and as directed by the Hon''ble High Court of Karnataka (the Court). The Court has directed the Bank not to deal with the pledged assets of the Company (including the shares held by USL Benefit Trust) as mentioned above till the disposal of the original writ petition filed by the Company in the Court.

f) As explained in Note 48 to the standalone financial statements, the Company came across information suggesting continuing past practices resulting in differences in reporting to the relevant Regulatory Authorities of yields of certain non-potable intermediates and associated process losses in the liquor manufacturing process, and the related actions taken by the Company in this respect.The Company will continue to monitor developments, if any, on this matter.

Our opinion is not modified in respect of the matters described under paragraph 4 above.

Key audit matters

5. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

a) Assessment of the appropriateness of provisions recognised and contingent liabilities disclosed in respect of certain tax matters (Refer notes 8, 18 and 50 to the standalone financial statements and Appendix 1 to Annexure A of the Audit Report)

As at March 31, 2019, the Company has significant tax exposures and is subject to periodic assessments/ challenges by tax authorities on transfer pricing, income tax and a range of indirect tax matters.

Our audit procedures included the following:

• Understood, assessed and tested the design and operating effectiveness of the Company''s controls in respect of identifying potential tax exposures and/or the accounting and disclosures thereof.

• Evaluated the related accounting policy for provisioning for tax exposures/ disclosure of contingent liabilities.

Key audit matter

How our audit addressed the key audit matter

Consequent to such tax assessments and demands relating to past several years, the Company has paid certain amounts under protest at various dates. The Company has also filed appeals with various appellate authorities against such demands.

Management judgement is involved in assessing the likelihood of ultimate outcome of the tax disputes to decide on the accounting/ disclosure requirements. In certain complex matters the probable amount of the outflows determined by management is supported by opinions obtained from external tax counsels/ experts (management tax experts).

We considered this a key audit matter as:

• The amounts involved are significant to the standalone financial statements

• Change in the management''s judgements and estimates may significantly affect the provisions recognised or contingent liabilities disclosed

• Matters of disputes are complex in some cases due to the industry in which the Company operates and may lack clarity under tax laws.

• Obtained management''s assessment in respect of tax demands on whether tax outflow is either probable, possible or remote.

• Along with the auditors'' experts, where necessary, evaluated the management''s assessment as follows:

o For the samples selected, read the correspondences received during the year from the tax authorities.

o Read views provided by the management, management tax experts as applicable.

o Assessed management''s positions on significant tax exposures for reasonableness.

o Ensured completeness of litigations by inquiring with the management, review of board minutes, and review of significant legal expenses.

o Evaluated the objectivity, competence and capabilities of the management tax experts

o Evaluated the adequacy of disclosures made in the standalone financial statements.

Based on the above procedures, we considered the management''s assessment in recognising provisions and disclosing contingent liabilities in respect of the stated tax matters, as reasonable.

b) Assessment of Expected Credit Loss (ECL) provision in respect of Loans to subsidiaries

(Refer Note 31 to the standalone financial statements)

The Company has outstanding loans due from some of its subsidiaries aggregating to INR 60,616 million as at year end.

These loans to subsidiaries fall within the scope of Ind AS 1 09- Financial Instruments and are measured at amortised cost using effective interest method. A credit loss provision is recorded to adjust the balance to the present value of estimated cash flows. The Company carries an accumulated credit loss provision of INR 54,363 million against such loans as at year end.

We considered provisioning for credit loss on loans to subsidiaries as a key audit matter as estimation of credit loss provision requires management to make significant assumptions on forward looking information for subsidiaries such as financial projections and the ability of the subsidiaries to repay those loans.

Our audit procedures included the following:

• Understanding, evaluation of the design and testing the operating effectiveness of controls to assess the adequacy of credit loss on loans to subsidiaries.

• Tested the methodology applied in the credit loss provision estimation by comparing it to the requirements of the relevant accounting standard.

• Tested the mathematical accuracy of management''s model used to calculate credit loss provision.

• Examined the repayment terms by reference to the loan agreements with subsidiaries and evaluated key underlying assumptions such as expected growth in revenue, cost savings, timing and ability to repay loans by evaluation of forecasts of future cash flows.

• Evaluated the adequacy of disclosures made in the standalone financial statements.

Based on above audit procedures performed, we did not note any significant exception to ECL provision in respect of loans to subsidiaries.

Other Information

6. The Company''s Board of Directors is responsible for preparation of other information. The other information comprises the information included in the Report of the Directors, Business Responsibility Report, Corporate Governance Report and Management Discussion and Analysis, but does not include the standalone financial statements and our auditor''s report thereon.

7. Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

8. In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of management for the Standalone Financial Statements

9. The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), changes in equity and cashflows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

10. In preparing the standalone financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s responsibilities for the audit of the Standalone Financial Statements

11. Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

12. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit.

13. We also:

a) Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to the standalone financial statements in place and the operating effectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

d) Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

e) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

14. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.

15. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

16. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

17. As required by the Companies (Auditor''s Report) Order, 2016, issued by the Central Government of India in terms of Section 143(11) of the Act (the Order), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure A statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

18. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) The matters stated in paragraphs (a), (b), (d), (e) and (f) of paragraph 4 above titled ''Emphasis of matter'' in our opinion, may have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on March 31,2019 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164(2) of the Act.

g) With respect to the adequacy of the internal financial controls with reference to the standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure B.

h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2019 on its financial position in its standalone financial statements - Refer Notes 8,18,43,44,46,47 and 50 to the standalone financial statements;

ii. The Company did not have any long term contracts including derivative contracts as at March 31, 2019 for which there were any material foreseeable losses - Refer Note 56 to the standalone financial statements;

iii. The Company has transferred amounts required to be transferred to the Investor Education and Protection Fund by due dates during the year ended March 31, 2019 except for five instances aggregating to INR 1 million with delays ranging from 5 to 22 days; and

iv. The reporting on disclosures relating to Specified Bank Notes is not applicable to the Company for the year ended March 31,2019.

For Price Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29, 2019

ANNEXURE ATO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 17 of the Independent Auditors'' Report of even date to the members of United Spirits Limited on the standalone financial statements as of and for the year ended March 31,2019

i. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets.

(b) The fixed assets are physically verified by the Management according to a phased programme designed to coverall the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

(c) The title deeds of immovable properties, as disclosed in Note 3.1 to the standalone financial statements (Property, plant and equipment), are held in the name of the Company, except as disclosed below:

Particulars

Freehold land

Leasehold land

Buildings

Number of cases

3

1

3

Gross carrying amount as at March 31,2019 (INR millions)

16

10

398

Net carrying amount as at March 31, 2019 (INR millions)

16

5

351

ii. The physical verification of inventory including stocks with certain third parties and excluding stock in transit have been conducted at reasonable intervals by the Management during the year. In respect of inventory lying with the remaining third parties, these have substantially been confirmed by them. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. There are no companies covered in the register maintained under Section 189 of the Act for the purpose of loans granted by the Company.

iv. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Act in respect of the loans and investments made. The Company has not provided any guarantees or security to parties covered under Section 185 and 186 of the Act.

v. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Sections 73, 74, 75 and 76 or any other relevant provisions of the Act and the Rules framed thereunder to the extent notified, with regard to the deposits accepted from the public. According to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any otherTribunal on the Company in respect of the aforesaid deposits.

vi. The Central Government of India has not specified the maintenance of cost records under Section 148 (1) of the Act for any of the products of the Company.

vii. (a) According to the information and explanations given to us including management''s assessment in respect of the provident fund matter as referred to in Note 50 (d) to the standalone financial statements and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing the undisputed statutory dues in respect of provident fund, employees'' state insurance, tax deducted at source, tax collected at source, value added tax, goods and services tax, though there has been a delay in a few cases and is regular in depositing other undisputed statutory dues including sales tax, duty of excise, income tax, duty of customs and other material statutory dues, as applicable, with appropriate authorities.

The extent of the arrears of undisputed statutory dues outstanding as at March 31,2019, for a period of more than six months from the date they became payable are as follows:

Name of the statute

Nature of dues

Amount (INR million)

Period to which the amount relates

Due date

Date of Payment

Stamp duty acts of various states

Stamp duty and interest thereon

138#

Various

Various

Not yet paid

# Estimated amount of liability including interest for delay in payment.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, value added tax, service tax, duty of customs, duty of excise and entry tax as at March 31, 2019 which have not been deposited on account of a dispute are disclosed in Appendix 1 to this report. There have been no dues of goods and services tax which have not been deposited on account of a dispute.

viii. According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to any financial institution or bank or Government or dues to debenture holders as at the balance sheet date.

ix. The Company has not raised any moneys by way of initial public offer, further public offer (including debt instruments) and term loans. Accordingly, the provisions of Clause 3(ix) of the Order are not applicable to the Company.

x. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, except for the matter relating to differences in reporting to relevant Regulatory Authorities of yields of certain non-potable intermediates and associated process losses in the liquor manufacturing process described in Note 48 to the standalone financial statements for the year ended March 31,2019, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of such case by the Management.

xi. Read with paragraph 4(c) of our report of even date on the standalone financial statements, the Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it, the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the standalone financial statements as required under Indian Accounting Standard (Ind AS) 24, Related Party Disclosures specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment of shares or fully or partly convertible debentures during the year. Accordingly, the provisions of Clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into any non cash transactions with its directors or persons connected with them. Accordingly, the provisions of Clause 3(xv) of the Order are not applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of Clause 3(xvi) of the Order are not applicable to the Company.

For Price Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29, 2019

APPENDIX 1 - PARTICULARS OF TAX DUES NOT DEPOSITED ON ACCOUNT OF A DISPUTE*

Referred to in paragraph vii(b) of Annexure A to the Independent Auditors''Report to the members of United Spirits Limited on the standalone financial statements as of and for the year ended March 31,2019

Name of the statute

Nature of dues

Disputed amount (INR millions)

Amount paid (INR millions)

Unpaid Amount (INR millions)

Financial Year to which the amount relates

Forum where the dispute is pending

Income Tax Act, 1961

Income Tax

563

563

-

2006-07 to 2008-09

Assessing Officer of Income Tax

Income Tax Act, 1961

IncomeTax

2,553

1,615

938

1996-97,2003-04,2005-06, 2007-08,2009-10, 2010-11, 2012-13 and 2013-14

Commissioner of Income Tax (Appeals)

IncomeTax Act, 1961

Income Tax

7,023

302

6,721

2014-15

Dispute Resolution Panel

Income Tax Act, 1961

Income Tax

16,767

7,080

9,687

1988-89 to 1989-90, 1991-92 to 1993-94, 1995-96, 1997-98 to 2000-01, 2002-03 to 2003-04, 2004-05, 2005-06 to 2008-09, 2011- 12 to 2013-14

Income Tax Appellate Tribunal

Income Tax Act, 1961

Income Tax

1,679

-

1,679

1993-94 to 2004-05

High Courts of various states

Customs Act, 1962

Custom Duty

0

-

0

1997-98

Commissioner of Customs

Customs Act, 1962

Custom Duty

2

-

2

1993-94 to 1995-96

Madras High Court

Service Tax - Finance Act 1994

Service Tax

1,344

-

1,344

2006-07 to 2015-16

Commissioner of Service Tax

Service Tax - Finance Act 1994

Service Tax

678

31

647

2004-05 to 2006-07, 2008-09 to 2010-11

Customs Excise and Service Tax Appellate Tribunal

Service Tax - Finance Act 1994

Service Tax

1

-

1

2012-13

High Court of Kerala

Central Excise Act, 1944

Central Excise Duty

1,473

70

1,403

1994-95, 1999-2000 and 2017-2018

Commissioner of Central Excise

Central Excise Act, 1944

Central Excise Duty

2

2

1999-2000

Deputy Commissioner of Central Excise

Karnataka Sales Tax Act, 1957

Sales Tax/ Value Added Tax

43

43

1996-97 and 2006-07

Civil Court, Karnataka

West Bengal Sales Tax Act, 1994

Sales Tax/ Value Added Tax

760

760

2015-16

Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts

Sales Tax/ Value Added Tax

32

6

26

1993-94to 1997-98,2010-11 to 2014-15

Commercial Tax Officer

* As represented by the management

#''0''indicates that the amounts involved are below INR five lakhs and the sign''-''indicates that amounts are Nil

Referred to in paragraph vii(b) of Annexure A to the Independent Auditors'' Report to the members of United Spirits Limited on the standalone financial statements as of and for the year ended March 31, 2019

Name of the statute

Nature of dues

Disputed amount (INR millions)

Amount paid (INR millions)

Unpaid Amount (INR millions)

Financial Year to which the amount relates

Forum where the dispute is pending

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

137

41

96

1994-95 to 1996-97, 2005-06, 2006-07, 2009-10 to 2013-14, 2015-16

Assistant Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

21

0

21

2003-04, 2004-05, 2006-07 to 2013-14, 2016-17and 2017-18

Additional Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

213

53

160

1985-86,1989-90, 2004-05 to 2013-14 and 2015-16and 2017-18

Deputy Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

1,619

471

1,148

2000-01 to 2014-15

Joint Commissioner of Commercial Taxes

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

237

47

190

1987-88,1990-91, 1992-93 to 2000-01, 2004-05, 2005-06, 2007-08,2009-10 to 2013-14

Commercial Taxes Appellate Tribunal

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

15

15

1993-94,2003-04, 2005-06

Commercial Taxes Appellate Tribunal and Revisionary Board

Central and Various State Sales Tax Acts

Sales Tax/Value Added Tax

198

157

41

1978-79 to 1984-85, 1988-89,1989-90, 1992-93,1993-94, 1996-97 to 2001 -02, 2007-08 and 2009- 10 to 2011-12

High Courts of various states

Various Entry Tax Acts

Entry Tax

0

0

0

1989-90

Assessing Officer

Various Entry Tax Acts

Entry Tax

37

37

2010-11 to 2012-13

Deputy Commissioner of Commercial Taxes

Various Entry Tax Acts

Entry Tax

7

1

6

2007-08 to 2010- 11

Joint Commissioner of Commercial Taxes

Various Entry Tax Acts

Entry Tax

24

16

8

2000-01,2004-05 and 2007-08

Commercial Taxes Appellate Tribunal

Various Entry Tax Acts

Entry Tax

250

-

250

2005-06, 2009-10

High Court of various states

Various Entry Tax Acts

Entry Tax

39

30

9

2003-04 to 2013-14

Supreme Court

Bengal Excise Act, 1909 and Bengal Excise (Amendment) Act, 2012

State Excise

13

13

1993-94

Civil Court, West Bengal

Bengal Excise Act, 1909 and Bengal Excise (Amendment) Act, 2012

State Excise

0

0

1994-95 and 2014-15

Collector of State Excise, West Bengal

Bengal Excise Act, 1909 and Bengal Excise (Amendment) Act, 2012

State Excise

9

9

1993-94 and 2016-17

Additional District Magistrate, West Bengal

Various State Excise Acts

State Excise

26

-

26

2010-11 to 2017-18

Superintendent of State Excise

Various State Excise Acts

State Excise

103

6

97

1974-75 to 1988-89, 1993-94 to 1998-99, 2002-03 to 2009-10, 2011-12,2013-1410 2016-17

Commissioners of State Excise

Various State Excise Acts

State Excise

69

3

66

1987-88,2001-0210 2003-04 and 2005-06

Additional Commissioners of Excise

Various State Excise Acts

State Excise

24

-

24

2001 -02 and 2003-04 to 2007-08

State Taxation Tribunals

Various State Excise Acts

State Excise

474

140

334

1972-73,1973-74,1980-81,1982-83,1997-98, 1998-99,2001-02,2002-03,2010-11,2012-1310 2015-16

High Courts of various states

Various State Excise Acts

State Excise

1,234

75

1,159

1971-72,1992-93,1996-97, 2002-03

Supreme Court

* As represented by the management

#''0''indicates that the amounts involved are below INR five lakhs and the sign''-''indicates that amounts are Nil

ANNEXURE B TO INDEPENDENT AUDITORS'' REPORT

Report on the Internal Financial Controls under Section 143(3) (i) of the Act

1. We have audited the internal financial controls with reference to the financial statements of United Spirits Limited (the Company) as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

2. The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records.and the timely preparation of reliable financial information, as required under the Act.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on the Company''s internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing deemed to be prescribed under Section 143(10) of the Act to the extent applicable to an audit of internal financial controls, both applicable to an audit of internal financial controls and both issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal controls based on the assessed risk.The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system with reference to the financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

6. A company''s internal financial control with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control with reference to financial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to Financial Statements

7. Because of the inherent limitations of internal financial controls with reference to financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, an adequate internal financial controls system with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as of March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by ICAI.

For Price Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29, 2019